Mridul Kotriwala, Kolkata V. I.T.O., Ward - 29(1), Kolkata, Kolkata

ITA 10/KOL/2023

AI Insights

The case involves Mridul Kotriwala, the appellant, contesting various disallowances made by the Income Tax Officer (ITO), Ward-29(1), Kolkata, and upheld by the CIT(A), in the assessment order for the year 2013-14. The primary issues revolved around disallowances under section 40A(2)(b) for excessive interest paid on loans from relatives, and various ad-hoc disallowances on expenses such as telephone, motorcar, motorcycle, and other general expenses. The Tribunal's decision addressed the reasonableness of interest rates and the arbitrary nature of some disallowances, leading to a reduction in the amounts disallowed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128748 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 20-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 05-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3); 250

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री संजय गग ग , न्याधयक सदस्य एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 10/KOL/2023 Assessment Year: 2013-14 Mridul Kotriwala.....................................................Appellant [PAN: AGDPK 0126 G] Vs. ITO, Ward-29(1), Kolkata......................................Respondent Appearances by: Sh. Manoj Kataruka, Adv., appeared on behalf of the Assessee. Smt. Ranu Biswas, Addl. CIT, Sr. D/R, appeared on behalf of the Revenue. Date of concluding the hearing : February 21 st , 2023 Date of pronouncing the order : May 12 th , 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2013-14 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi [in I.T.A. No.: 10/KOL/2023 Assessment Year: 2013-14 Mridul Kotriwala. Page 2 of 5 short ld. “CIT(A)”] dated 16.12.2022 arising out of the assessment order framed u/s 143(3) of the Act dated 10.03.2016. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the additions of Rs.30,150/- made by the AO u/s 40A(2)(b) is contrary to the material evidences on record and the additions are arbitrary, excessive and illegal. 2. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the estimated disallowances made by the AO of aggregate of Rs.24,632/- being 10% of the telephone expenses, 10% of motorcar expenses and 10% of motorcycle expenses is contrary to the evidences on record and the addition is arbitrary, excessive and illegal. 3. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the estimated disallowances made by the AO of Rs. 12,699/- on account of 10% on depreciation of motorcar is contrary to the evidences on record and the addition is arbitrary, excessive and illegal. 4. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the estimated disallowances made by the AO of aggregate of Rs.2,66,948/- being 5% of the freight and transport expenditure, 5% of staff welfare expenses, 5% of general expenses, 5% of salary, wages and bonus expenses and 5% of travelling expenses is contrary to the evidences on record and the addition is arbitrary, excessive and illegal. 5. That the order of the Ld. CIT(A) partly confirming the addition made by the A.O. is arbitrary, excessive and illegal. 6. That the above grounds of appeal will be argued in details at the time of hearing and the appellant craves leaves to submit additional grounds of appeal if any and or alter, vary, modify or rectify the statement of facts and grounds of appeal at or before the time of hearing.” I.T.A. No.: 10/KOL/2023 Assessment Year: 2013-14 Mridul Kotriwala. Page 3 of 5 3. At the outset, ld. Counsel for the assessee submitted that most of the disallowances made by ld. AO are ad-hoc in nature and the same deserves to be deleted. Further, as regards the addition made u/s 40A(2)(b) of the Act at Rs. 30,150/- it was submitted that the interest rates are not excessive and they are as per prevailing market rate, thus, no addition is called for. 4. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities. 5. We have heard rival contentions and perused the records placed before us. 6. Ground no. 1 relates to the disallowance u/s 40A(2)(b) of the Act at Rs. 30,150/-. We observe that the assessee has taken loan from the relatives on which interest has been paid. Ld. AO noticed that the market rate is at 13% whereas the assessee is paying the interest rate at 14% as well as 15%. Ld. AO adopting the rate of 13% computed disallowance u/s 40A(2)(b) of the Act for excess interest paid to relatives at Rs. 30,150/-. The assessee could not get any relief by ld. CIT(A). 7. We, however, notice that determination of market rate and reasonableness of the rate is a subjective issue and ld. AO failed to provide any comparable instance before adopting the standard rate of 13% and therefore, in absence of any material to show that the appellant has paid excess interest, we fail to find any merit in the addition made by ld. AO. We, thus, reverse the finding of ld. CIT(A) and delete the disallowance of Rs. 30,150/- and allow ground no. 1 raised by the assessee. I.T.A. No.: 10/KOL/2023 Assessment Year: 2013-14 Mridul Kotriwala. Page 4 of 5 8. Ground nos. 2 & 3 relate to addition made for disallowing various expenses at Rs. 24,632/- on account of 10% of telephone expense, motorcar expense and motorcycle expense and Rs. 12,699/- on account of 10% on depreciation on motorcar used for personal expenses. We observe that ld. CIT(A) has already scaled down 50% of the disallowance made by ld. AO though are ad-hoc in nature but made for want of necessary documentary evidence from the assessee. We, however, considering the facts of the case, restrict the disallowance to 5% as against 10% made by ld. CIT(A). Thus, the assessee gets relief of Rs. 12,316/- in ground no. 2 and Rs. 6,350/- in ground no. 3. Accordingly, ground nos. 2 & 3 are partly allowed. 9. Ground no. 4 is against the finding of ld. CIT(A) sustaining the disallowance at the rate of 5% amounting to Rs. 2,66,948/- made by ld. AO on the expenditure pertaining to freight and transport, staff welfare expense, general expense, salary, wages, bonus and travelling expenses. We observe that ld. AO has made disallowance not specifically pointing out any discrepancy but made ad-hoc disallowance. On the other hand, the assessee is also unable to furnish complete details as required. 10. We, thus, considering the fact that the assessee maintains books of accounts regularly and they have not been rejected and therefore, being fair to both the parties, sustain the disallowance at Rs. 75,000/- as against Rs. 2,66,948/- sustained by ld. CIT(A). Thus, ground no. 4 raised by the assessee is partly allowed. I.T.A. No.: 10/KOL/2023 Assessment Year: 2013-14 Mridul Kotriwala. Page 5 of 5 11. Ground no. 5 is general in nature which needs no adjudication. 12. In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 12 th May, 2023 Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 12.05.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. Mridul Kotriwala, 6, Burdwan Road, Kolkata-700 027. 2. ITO, Ward-29(1), Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata